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Stakeholders seek leeway for DisCos, NERC despite harsh business environment

By Kingsley Jeremiah, Abuja
12 May 2022   |   3:25 am
Experts in Nigeria’s power sector have called for improvement in the operations of distribution companies as well as the sector’s regulator, Nigerian Electricity Regulatory Commission (NERC) despite the harsh business environment in the country.

DisCos

Experts in Nigeria’s power sector have called for improvement in the operations of distribution companies as well as the sector’s regulator, Nigerian Electricity Regulatory Commission (NERC) despite the harsh business environment in the country.

The stakeholders noted that while Nigerians and the utility companies are all battling with rising insecurity and harsh conditions of living, there was need for accountability, strong regulation, prompt payment of electricity tariff and strong policies that would address the gloomy state of the nation’s power sector.

Consultant, Nextier Power, Chiamaka Asoegwu, told The Guardian in a chat that while part of the performance agreements that led to the unbundling of the defunct power sector into the 11 Electricity Distribution Companies was the setting of cost-reflective tariffs that would incentivize more investments in power supply reliability and availability, both the regulator and the DisCos have not fulfilled their end of the bargain.

“The macroeconomic factor in Nigeria that is especially important to tariff setting is foreign exchange (because gas prices and many Capital Expenditures are indexed to the dollar). There are continuous security threats in various parts of Nigeria. In the north, parts of the transmission network were blown up by terrorists, in the south, we have continuous pipeline destruction making gas unavailable, and discos continue to experience cable vandalism and theft in various areas of their network, to mention but a few,” Asoegwu noted. According to her, the prevailing factors affected power availability to the customers and hamper DisCos best effort at providing reliable supply, adding that the same economic and security challenges affect every Nigerian in their various endeavours and potentially leads to the inability of customers to pay for the higher tariffs.

She noted that the country must therefore create an enabling environment for both businesses and the populace to increase the disposable income, ensure security, and a thriving atmosphere for businesses and foreign investments.

“There is a need to review existing policies and be ready with the political will to drive implementation. The discos should be accountable as well as regulators on the requirements of their performance contracts. The discos should optimize their operations and clean their systems to generate more revenue and reduce wastages and losses.

Asoegwu stated that with a poorly diversified energy mix where the majority (85 per cent) of installed capacity is fueled by gas and still operating in the transitional electricity market (TEM), as against the Final Market, with bilateral contracts between electricity buyers and sellers at all levels, and a central balancing mechanism through the creation of a spot electricity market, the country must increase energy mix and drive the adoption of other energy sources.

She also said metering remained crucial and the way forward for DisCos, adding that the Federal Government must be actively involved in monitoring the mass metering scheme to ensure accelerated progress, especially in view of the current Service-Based Tariff regime.

Public-private partnership consultant, who participated in the privatisation process of the power sector, Joseph Tsavsar said NERC was afraid of saying the poor performance of the sector after privatisation was due to the failure of the government to perform on its obligations in the agreements signed with DisCos.

According to him, cost reflective tariffs, insecurity and forex are all government obligations in the agreement, adding that since the government failed DisCos were only managing to survive at the expense of the poor consumers.

“Electricity tariff is going up because there is no investment to improve on power supply. There is no incentive to attract investment in the sector, lack of sanctity of contract by government does not create an enabling environment for people to invest, which would create competition in the sector and in turn reduce tariff,” Tsavsar said.

He stated that the DisCos were in a tight corner, stressing that while they entered into a contract with government, all the terms have been abandoned, noting that even if government was to pay back the investors, it has no such resources.

“There is no way they can perform as expected because the government has not performed on one of their obligations.

The mistake I always pointed is believing that the government will perform on its obligations, that was what convinced the banks to lend them the 70 per cent of the cost in the first place. The Banks are going to take-over all the DisCos one by one, it is just a matter of time. “Blame government for the failure of the privatisation not the investors, no investor will put his money where there is high risk.”

Also speaking on increase in electricity tariff, Tsavsar said while indices of forex, inflation and others call for the review of tariff, it may not mean increase in power supply because there were both generation and transmission constraints which are beyond the regulator.

According to him, the issues of generation, transmission and distribution should be addressed equally to guarantee availability of power.

Tsavsar noted that reversing privatisation exercise may not be necessary as the same problems of the sector are still prevailing.

A stakeholder, Adegbemle Adetayo insisted that NERC had no reason to be speaking or giving excuses on behalf of the Discos, stressing that it shows a deep-rooted error in the mindset of the regulators, who were supposed to be neutral.

“It also shows that NERC, as composed, is bereft of ideas of what they’re doing. Yes, it is your job to understand what the challenges of the sector participants are, it is also your job to find a solution to the problems,” he noted.

He said it remained sad that the regulator did not see a reason to speak against the challenges of consumers, especially business owners, who are suffering from the inefficiencies of the DisCos.